Profits down at British Land despite ‘better than expected’ second half of the year

British Land currently has £210m-worth of residential property to sell, £150m of which is at Clarges Mayfair

“We expect to be operating in an uncertain environment for some time”, warns British Land boss Chris Grigg, as the firm reports a 7.4% rise in underlying profits over the last year (from £363m to £390m) – but a 1.4% reduction in the value of the Clarges-developing Plc’s overall portfolio (to £14,648m), and a chunky 85% drop in pre-tax profits.

British Land’s pre-tax profits fell from the previous year’s £1.3bn (fuelled by a heady £616m jump in the portfolio value) to £195m in the financial year just gone.

The value of the firm’s standalone residential portfolio (including JVs), however, actually increased by 4.2% over the year, with a distinctly divided year offering up a flat first half followed by a 5.4% jump in the latter six months.

Here are some key points from British Land’s residential front in the last financial year:

  • British Land currently has £210m-worth of residential property to sell, £150m of which is at Clarges Mayfair.
  • Overall, £56m-worth of resi was exchanged across British Land schemes; that’s 4.5% above original valuation.
  • Another £27m-worth of resi is reserved at prices in line with March 2017 valuations.
  • British Land completed 187 apartments at Aldgate Place (Phase 1) and The Hempel Collection.
  • The average capital value attributed to the firm’s resi units is £981 per square foot, including developments at end value and mixed use.
  • 11 apartments are left at Clarges Mayfair. These will be be sold once they are completed in late 2017, although one of the larger apartments was sold “in the year ahead of valuation following a one-off approach” – leading to a total of £19m-worth of resi being sold at Clarges in the financial year.
  • Prices at The Hempel Collection “were adjusted in line with market expectations down 10% prior to the launch in March 2017”. The launch lead to an “acceleration” of sales.
  • Just one apartment is left for sale at Aldgate Place; units have so far sold in line with valuations. £46m-worth of resi was sold at Aldgate Place in the financial year.
  • The value of the Canada Water regeneration site (which aims to deliver up to 3,500 new homes) fell by 10.8% “reflecting the valuer’s reassessment of development risk and returns, particularly on residential, as well as planning and feasibility costs not recovered”.
  • Canada Water’s 46-acre site is valued at £6m per acre; the next major value creation step is expected to be on securing planning.

Chris Grigg, Chief Executive of British Land: “We are reporting a good set of results today despite an uncertain environment over the last 12 months. We are particularly pleased by the increase in underlying profits, by our strong leasing performance across the business and by the very successful sales we have made. The increase in valuations in the second half is also better than many expected six months ago. These results reflect the continuing execution of our strategy, providing space that responds to changing lifestyles and really fulfils customers’ needs. We expect to be operating in an uncertain environment for some time; in this context we will benefit from the resilience of our business, the quality of our portfolio and the strength of our finances. We also look forward with cautious optimism as we believe that we can generate incremental returns by allocating capital to development opportunities we have created, whilst keeping risk at an appropriate level and maintaining flexibility to respond to changes in our markets.”